Owner of major Broadway theaters sues insurance companies over coronavirus payouts

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Broadway theater owner Jujamcyn Theaters is suing its insurance companies, Federal Insurance Company and Pacific Indemnity Company, for paying merely $250,000 to cover what the company claims should be "tens of millions of dollars" in coronavirus-related losses.

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The lawsuit, filed with the Southern District of New York, alleges that Federal Insurance Company "flatly denied coverage, refusing to pay even a penny to help Jujamcyn" while Pacific Indemnity paid the company $250,000, a fraction of what it claims it should've been paid under its insurance policy.

"Federal and Pacific knew, and publicly acknowledged, that they could be obligated to pay for massive losses in the event of a pandemic. Federal and Pacific also knew that they could use common and widely available exclusions to guard against being obligated to pay for pandemic-associated losses," Jujamcyn said in the lawsuit. "However, they decided not to do so here, selling Jujamcyn the all-risks Federal Policy and all-risks Pacific Policy and deliberately omitting from the policies any potentially applicable exclusion associated with a virus-related pandemic."

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On March 12, the curtain fell on Broadway theaters after an executive order by Gov. Andrew Cuomo banned gatherings of 500 or more people.

People walk past the Shubert Theatre after it was announced Broadway theatres will close for a month on March 12, 2020 in New York City. (Photo by Gary Hershorn/Getty Images)

Jujamcyn, which hosted more than 48,000 audience members from around the globe in a given week prior to the shutdown, submitted its business income loss claim to Federal and notified the insurance company of at least seven individuals within its theaters who tested positive for COVID-19.

The insurer denied coverage, however, saying that there was no “direct physical loss or damage,” which normally triggers payment under the insurance policy, and that the governmental orders did not prohibit access to the theaters, meaning theater employees were not barred from entering and checking on the buildings.

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Jujamcyn argues that the virus falls under physical property loss and damage, according to an executive order signed by New York City Mayor Bill de Blasio on March 16, citing its ability to adhere to surfaces for days and linger in the air inside buildings for hours.

In addition, Jujamcyn argued the virus has "substantially impaired and rendered incapable the performance of the intended function of Jujamcyn’s properties" due to the fact that there is "no date set or anticipated by which theaters will be permitted to reopen in any capacity" without the wide availability of a vaccine.

"Many New York businesses were subsequently authorized to reopen or have some prospect of resuming operations in the near future," Jujamcyn said. "The Broadway theater industry, however, has no such prospects and no reason to believe that theater owners like Jujamcyn will be permitted to open—in any capacity—anytime soon. As a result, Jujamcyn has suffered, and continues to suffer, substantial financial losses."

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The insurance companies' parent, Chubb, told the New York Times that while it has paid out millions of dollars this year for the pandemic-related disruption of Broadway performances, most standard property insurance policies do not cover pandemic risk when it comes to business interruption.

“Creating false expectations about coverage that does not exist, including filing baseless lawsuits, will not solve this crisis,” Chubb told the outlet.

Ticker	Security	Last	Change	Change %
CB	CHUBB LIMITED	126.39	-1.37	-1.07%

However, Chubb previously wrote in a 10-K filing that it has "substantial exposure to losses resulting from natural disasters, man-made catastrophes such as terrorism or cyberattack, and other catastrophic events, including pandemics."

Both Jumacyn and Chubb did not immediately return FOX Business' requests for comment.

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Jujamcyn operates five theaters that are currently home to hits including "Hadestown", "The Book of Mormon", "Moulin Rouge: The Musical" and "Mean Girls." The company also owns the theater that housed the production of "Frozen: The Musical", which was one of the multiple shows that have closed permanently due to the pandemic.

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Reeve Carney during the Broadway Press Performance Preview of “Hadestown” at the Walter Kerr Theatre on March 18, 2019 in New York City. (Photo by Walter McBride/Getty Images)

Broadway raked in more than $1.8 billion during the 2018-2019 show season, with actors playing to more than 14.7 million people, according to figures from the Broadway League.

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